New River prices $125 million convertibles to yield 3.5%, up 25%

New York, July 18 - New River Pharmaceuticals Inc. priced $125 million of seven-year convertible subordinated notes to yield 3.5% with a 25% initial conversion premium.

The deal, priced after the close Wednesday, came at the middle of talk, which put the coupon at 3.25% to 3.75% and the initial conversion premium at 22.5% to 27.5%.

The conversion ratio is 29.0803 shares per $1,000 principal amount.

There is an over-allotment option for a further $18.75 million.

Merrill Lynch is the bookrunner of the Rule 144A offering.

The notes will be non-callable, and there are no puts.

There is a contingent conversion threshold at 120% of the conversion price.

The notes have dividend and takeover protection, and there is a net-share settlement feature.

New River is a Radford, Va.-based specialty drug maker.

The proceeds of the deal will be used to buy back up to $51 million worth of New River stock, of which $41 million will be repurchased with the closing of the deal. Some of the proceeds will also be used to fund convertible note hedge transactions, and any remaining monies will be used as working capital to develop New River's attention deficit hyperactivity disorder drug NRP104.

The hedge transaction will raise the effective conversion premium from New River's perspective to 50%.

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